Warning over proposed new banking measures

The Reserve Bank is being warned proposed new measures to curb potential housing bubbles might damage the economy.

The central bank has put up options that include forcing banks to hold more cash during credit booms, and restricting mortgages that have high loan-to-value ratios, and is currently reviewing submissions.

The Banker's Association is lukewarm about the extra measures saying it is notoriously difficult for central banks to know when to act and how to do so effectively.

The lobby group says if the Reserve Bank gets it wrong, it could make households poorer and deter banks from lending.

Any change by the Reserve Bank will require the approval of Finance Minister Bill English.